U.S. Representative Barney Frank (D-MA), chairman of the House Financial Services Committee, recently announced that the government-backed mortgage finance giants, Fannie Mae and Freddie Mac are likely to be abolished and replaced with a new system for housing finance. Historically, Fannie and Freddie have been vital to the nation’s mortgage market, buying loans from lenders, insuring them against default and supplying fresh cash to make more loans. Since the recent financial catastrophe, the two companies have faced mounting losses on loans that have threatened their collapse. In September 2008, the government-sponsored entities were placed into conservatorship and are now run by federal regulators. The future of the nation’s housing finance model remains unclear. Treasury Secretary Timothy F. Geithner said Thursday that Congress likely won’t be able to take up housing finance reform until 2011. However, the administration will release principles for reform next month. Read more…
*At time of publishing, NH&RA incorrectly reported that Fannie Mae and Freddie Mac became government-sponsored enterprises (GSE) in September 2008. Fannie Mae and Freddie Mac were placed into conservatorship in September 2008.
